Hong Kong Is the Latest Tripwire for Tech Firms in China

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On Wednesday morning, Mark Kern sat down with his 12-year-old son to tell him the guild was breaking up. Kern had been involved with World of Warcraft from the very beginning—a game developer himself, he was the original team leader for the title when Blizzard Entertainment launched it in 2004—and was a steadfast player of WoW Classic, a throwback version of the game that launched in August. Yet, things had changed. Over the weekend, an esports player for another Blizzard title, Hearthstone, had shouted a Hong Kong protest slogan on the game's official Taiwanese livestream; in response, Activision Blizzard suspended the player from high-level competitive play for a year and said it would not pay out his past winnings, claiming that he had violated rules barring acts that "offend a portion or group of the public."

For Kern, who was born in Taiwan and spent time in Hong Kong, the studio he'd called home for nearly eight years had changed. He told his son that he had decided to cancel his WoW subscription, putting an end to their family tradition. "I explained how … people [in Hong Kong] were very concerned about their freedom and China's history of human rights abuses," Kern tells WIRED on Discord. "I told him that Blizzard had punished a Hearthstone player for supporting Hong Kong and what that punishment entailed." His son decided to do the same.

They weren't the only ones. While Kern was perhaps the highest-profile game developer to publicly denounce Blizzard, the sentiment swept across the internet this week, from the Twitter hashtag #BoycottBlizzard to multiple Blizzard-related subreddits. Employees at Blizzard's Southern California headquarters protested by taping paper over the phrases "Every Voice Matters" and "Think Globally" on a statue.

The Blizzard dustup was the most meme-suffused variation of a theme heard again and again this week: the sound of politics colliding with economics. The NBA, an organization that has long cultivated a Chinese fan base and whose current preseason features exhibition games against Chinese teams, scrambled between appeasement and adamance after the Houston Rockets' general manager tweeted (then deleted) his solidarity with Hong Kong protesters. Apple, already under fire for hiding the Taiwanese flag from the iOS emoji keyboard in the Hong Kong region, removed an app that helped Hong Kong protesters track police whereabouts. Google did the same with an Android game that let users play as a Hong Kong demonstrator.

Each decision invited furor; each, at this point, remains unchanged. In a statement, Apple said "concerned customers" prompted the removal of the location app, HKmap.live. Apple said the app "has been used in ways that endanger law enforcement and residents in Hong Kong. The app displays police locations and we have verified with the Hong Kong Cybersecurity and Technology Crime Bureau that the app has been used to target and ambush police, threaten public safety, and criminals have used it to victimize residents in areas where they know there is no law enforcement. This app violates our guidelines and local laws, and we have removed it from the App Store."

"We have a long-standing policy prohibiting developers from capitalizing on sensitive events such as attempting to make money from serious ongoing conflicts or tragedies through a game," Google said in its own statement. "After careful review, we found this app to be violating that particular policy and suspended it, as we have done with similar attempts to profit from other high-profile events such as earthquakes, crises, suicides, and conflicts." (Blizzard "does not have a statement to share," a spokesperson for that company said when reached for comment on Wednesday.)

Over the past decade, China has embraced US sports and high-tech products like iPhones and Teslas, and US businesses granted access to China’s domestic market have benefited from a huge and increasingly wealthy set of consumers. For US tech companies, the ties often run deeper: They rely on China’s factories and supply chain and, increasingly, its top-class research talent, says Chris Meserole, a foreign policy fellow and technology expert at the Brookings Institution in Washington. “I don’t think the public is aware of just how fully intertwined our economies are,” he says.

“The Chinese government understands that it wields tremendous power over US businesses in exchange for access to the market.”

SAMM SACKS, NEW AMERICA

Those ties are increasingly strained as political and economic tensions ratchet up amid the ongoing trade war, and in response to politically charged flashpoints like the Hong Kong protests. The way Blizzard, the NBA, and Apple have capitulated to the Chinese government reflects the economic reality of today’s relationship.

Meserole says US and Chinese companies are already looking for ways to divest themselves from the other country, by finding alternative sources of manufacturing or investment for example. He believes the trend will continue. “To me the question isn’t ‘Will we see a decoupling?’” he says. “It is ‘At what scale will we decouple?’”

Disentangling US and Chinese interests may prove painful for the businesses involved and for each country’s economy. NBA games, for example, are broadcast on Chinese state media CCTV, and the league has partnered with Chinese media company Tencent to stream its games in the country—a $1.5 billion partnership that Tencent and CCTV suspended this week, prompting fans there to seek refunds.

For US game studios, which can't operate in China without a government-granted license and often form joint ventures with Chinese companies, jeopardizing that license means jeopardizing an increasing swath of your bottom line. "More and more companies have grown dependent on China's market size, which can easily account for half your game revenue," Kern says. "That's an inordinate amount of pressure." The calculations are even more complex for Activision Blizzard: Asia accounted for 12 percent of the company’s revenue in the first half of the year; and Tencent holds a 5 percent stake in the company.

Each of this week’s disputes unfolded against the backdrop of the pro-democracy protests in Hong Kong. In addition to stamping out dissent, China also may want to signal its ability to hurt the US economically. “The Chinese government understands that it wields tremendous power over US businesses in exchange for access to the market,” says Samm Sacks, an expert on China’s digital economy at New America, a think tank.

With trade negotiations between the US and China resuming this week in Washington, including a scheduled meeting between President Trump and Chinese Vice Premier Liu He, such tension will make it more difficult for US companies to simply ignore politics in China. But Sacks says that with the two nations seemingly on course for greater conflict, it may be important to recognize the things they have in common. “There's a lot of nationalist rhetoric on both sides of the Pacific right now,” she says. “But the reality is that a splintering of tech and culture would be incredibly disruptive, and even dangerous.”

For US consumers like Kern, the blowback is less a matter of nationalism than of principle. Citing two NBA fans who were ejected from a game in the US for chanting "Free Hong Kong," he calls companies' need to back away from China an "unethical dilemma." "Either you start to censor your games, your players, your employees to Chinese standards," he says, "or you don't get investments, you don't get access to half the market, and you can't compete globally."